NetEase Shutting down Online Luxury Service

NetEase, the Chinese portal/gaming company announced shutting down its luxury goods online retailing business NetEase Shangpin (网易尚品 l.163.com) by year-end, less than one year after its launch earlier this year.

The service, launched in January 18 of this year, was supposed to capitalize on the trend that more and more Chinese are inclined to buy luxury goods from online channels for cheaper price, abundant choices among other reasons.

Seems Promising Market

According to BainCapital, luxury goods sales in China in last year reached Euro 9.2 billion (US$ 11.8 billion), up 30% over the previous year. The Boston-based private equity also estimated that for 2011 the sales in China would surpass RMB 100 billion (US$ 15.7 billion). The momentum growth gave rise to the top brands’ “China gold rush” in the gloomy global economy. Coach, for instance, has teamed up with Taobao Mall, the largest Chinese B2C site by transaction volume to set up an online flagship store in the middle of this month with more than 43 items sold to date.

According to the statistics by Beijing-based market researcher Zero2IPO, there were more than 91 disclosed ecommerce-related investments (US$ 3.841 billion ) from January to November of this year, while from last year to this year, there were 23 investments concerning eretailer of luxury goods, including Zbird, Kela.cn, VipStore.com, Shangpin.com, Secoo.cn and so on.

Though the market seems promising, the luxury goods online selling business is still seeing some pitfalls, such as uncertain regulations and compromised consumer experience & confidence due to counterfeit goods.